The Pentagon’s Slush Fund

Julia Harte is a national security reporting fellow at The Center for Public Integrity. The Center for Public Integrity is one of the country’s oldest and largest nonpartisan, nonprofit investigative news organizations. Sign up for its newsletter.

What does an $810 million U.S. defense “initiative” to “reassure” Europe in the wake of Vladimir Putin’s Crimean land grab have to do with emergency war needs in Afghanistan and Iraq? Absolutely nothing. So why does that hefty sum appear in the military’s budget, now pending on Capitol Hill, meant to support operations in those two Middle Eastern countries?

This is not how America’s war budget—otherwise known as the Overseas Contingency Operations (OCO) fund—is supposed to work. The White House in 2011 said that the OCO, originally established in 2001 under a different name, was just for “temporary and emergency requirements” for fighting in Iraq and Afghanistan. Now, many experts are saying that its continued use is emblematic of a five-year collapse in Washington fiscal discipline.

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The OCO budget isn’t subject to spending limits that cap the base defense budget for each of the next seven years; it’s often omitted altogether from tallies of how much the military spends each year; and, as an “emergency” fund, it’s subject to much less scrutiny than the rest of what the military asks for.

This sort of special war funding was supposed to decline and then disappear as combat operations in Iraq and Afghanistan wound down, but that constraint has receded into the distance, if not disappeared altogether, as the OCO fund has become a larger catchall—a slush fund used by the military services, by lawmakers and by the White House to escape budgetary caps, officials and independent experts say.

Although President Barack Obama promised as a candidate in 2008 to “end the abuse” of wartime emergency spending, it’s now clear he will not do so before leaving office in 2016, these experts agree. This year the main defense authorization budget is likely to come in at a cool $521.3 billion, snugly within legal limits set for federal spending in 2015. But the OCO includes an additional $63 billion. More than a 10th of all Pentagon spending will remain uncapped and subject to much less scrutiny than the remainder.

The European initiative is just one of many programs in the OCO budget that have little or nothing to do with the Iraq and Afghanistan wars. The new Defense Authorization Act for 2015, which may be signed by the president as early as tomorrow, includes $55 million to retain the “air superiority presence” of the U.S. Air Force. Another $351 million of OCO funds would go to Israel for its Iron Dome missile defense system.

In the OCO portion of the separate omnibus appropriations bill for 2015, which Congress is trying to pass within the next few weeks, another $1.2 billion is set aside for the military’s reserve components to buy “miscellaneous equipment” the Pentagon didn’t even seek. And $3.3 billion is allocated to classified Air Force equipment purchases.

The OCO budget—which is higher than the entire budgets for most federal departments—as a result has become one of those Washington abominations that makes advocates of fiscal discipline inside and outside the Beltway shake their heads in dismay, even as they forecast its continued existence as a supposedly necessary adjunct to the main, or so-called “base” Pentagon budget. The OCO fund is valued because it can absorb costs that would otherwise push the base budget over its limit, an event that by law would trigger a variety of punishing new spending cuts for the Pentagon.

“We figure there’s about—well, there’s a lot of money in the OCO that should probably be in base. It’s not because we didn’t want it to be in the base; it’s just happened over 12 years,” said Deputy Defense Secretary Robert Work in September at a Washington meeting of the Council on Foreign Relations. Going forward, he said, the government has three choices: remove the spending caps on the base budget, combine OCO and base funding without removing the caps or agree that OCO will continue into the future. He predicted the third option.

“With the crisis in Ebola, with all of these things, the European reassurance initiative, we’re going to have to have overseas contingency operations funding for some time,” Work said.

It’s not much of a secret anymore that OCO spending is only occasionally for emergency military tasks. Todd Harrison, an analyst at the Center for Strategic and Budgetary Assessments, estimates that about half of the OCO budget in the new authorization bill covers expenses that actually should be included in the base budget.

Harrison says that portion has grown since 2012, based on the simple fact that the number of troops deployed in Afghanistan is shrinking faster than OCO spending. The Defense Department’s budget request for 2015 anticipated that troop levels in Afghanistan would drop by two-thirds from the previous year—but requested only a 36 percent cut in OCO funding for Afghanistan. As a result, OCO spending per service member in Afghanistan has risen to more than double what it was last year.

Jamal Brown, deputy press secretary for the Office of Management and Budget, did not return calls for comment. But other sources said that the administration, faced with a $115 billion gap over the next four years between what the budget caps allow and what the Pentagon wants to spend, now appears to regard OCO as a permanent fixture of the defense budget.

The Government Accountability Office noted in a June 2014 report, for example, that most of the Pentagon’s spending for the Central Command is in the OCO budget, even though many of those costs will persist beyond 2016, when U.S. operations in Afghanistan are supposed to end.

In the report, entitled “Guidance Needed to Transition U.S. Central Command’s Costs to the Base Budget,” GAO analyst John Pendleton urged the department to craft that guidance quickly and set a deadline for completing the shift. Although the Defense Department promised to provide such guidance by the end of July 2014, it has not yet done so, according to the GAO.

“This is an iterative process, not a one-time bit of guidance. The question of migrating costs from OCO to Base is being discussed at length throughout the ongoing budget process,” said Bill Urban, Defense Department spokesman, in an emailed comment. He declined to elaborate.

Moreover, the OCO budget isn’t a fiscal salve only once a year. The Defense Department comptroller can—and often does—ask the House and Senate committees on appropriations and armed services for permission throughout the year to add new spending to the OCO budget if programs already in that budget wind up costing less than anticipated. Often, additional non-emergency expenses sneak in during that process.

Over the past four years, for example, the Defense Department’s comptroller has sought congressional approval to add roughly $20 billion worth of expenditures to OCO to cover costs not previously stated in the budget, including many that do not appear to be emergencies or directly related to combat operations.